Shannon Company segments its income statement into its North and South Divisions

Question

Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $1,170,000, 48%, and $23,400, respectively. The North Division’s contribution margin and contribution margin ratio are $202,800 and 52%, respectively. The South Division’s segment margin is $226,200. The company has $339,300 of common fixed expenses that cannot be traced to either division. Required: Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. In addition, for the company as a whole and for each segment, show each item on the segmented income statements as a percent of sales. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3))

Explanation / Answer

Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions.

Total % North % South % Sales 2437500 100% 390000 100% 2047500 100% Variable cost 1267500 52% 187200 48% 1080300 52.8% Contribution margin 1170000 48% 202800 52% 967200 47.2% Fixed cost 807300 33.1% 66300 17% 741000 36.2% Segment margin 362700 14.9% 136500 35% 226200 11.0% Common Fixed expense 339300 Net operating income 23400

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